Officials project slightly more money for the state, but tussle over cost of meeting education ruling

Faced with the need for billions of dollars to fully fund public schools next year, the state will have only slightly more money in its coffers than expected, officials announced Wednesday.

The state Economic and Revenue Forecast Council projected about $354 million in extra revenue by 2019, beyond what was previously anticipated. That’s thanks largely to a bit more money collected from the sales tax, the real estate excise tax and an economy that’s faring slightly better than expected, said David Schumacher, director of the Office of Financial Management.

The forecast council also noted a dip in housing permits issued, a barometer for how the residential construction sector is doing. That dip tempered “some of the good news” in other areas of the state economy that contributed to the extra revenue, said Steve Lerch, the executive director of the council.

All in all, the new projection shows “a pretty modest increase” in light of a two-year budget that’s likely to be more than $40 billion, Schumacher said.

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One of those “huge problems” — the state Supreme Court’s 2012 McCleary decision that requires the state to fully fund K-12 education by a 2018 deadline — was the center of debate at the forecast council’s Wednesday meeting to approve a budget outlook, a planning tool for the state budget.

Though state lawmakers have already poured billions of dollars into public schools to meet some aspects of the ruling, the high court has said legislators still need to end an overreliance on local levies. The state is in contempt of court and is being fined $100,000 a day for the Legislature’s failure to come up with a plan to meet the 2018 funding deadline.

The forecast council was split over whether to include in the budget outlook estimates of how much money the state would spend to meet McCleary.

Despite pushback from Republican lawmakers on the council, agency officials and Democratic lawmakers approved an outlook that estimates $3.5 billion in spending every two years to meet the McCleary mandate.

The $3.5 billion estimate has been a relatively standard one thrown around in recent years. But state Sen. John Braun, R-Centralia, and state Rep. Terry Nealey, R-Dayton, objected to the budget outlook, saying lawmakers don’t yet agree on how much money is necessary to fully fund basic education.

Braun cited a consultant’s report delivered Tuesday that was supposed to help legislators home in on that number by illustrating how much local levy money goes toward basic education. But when the report was delivered, it became clear lawmakers still need to agree on what is considered basic education to figure out the final price tag of McCleary.

“Why are we making a number at all when we know we have more work to do?” Braun said of the budget outlook’s estimate. He argued that the forecast council’s move was a partisan attempt to sway discussion on the subject.

Schumacher said while nobody knows if meeting McCleary will cost “exactly” $3.5 billion, “I think there’s broad agreement that we’re in that neighborhood.”

Democratic Gov. Jay Inslee will release his budget proposal in mid-December. Schumacher said it will include a plan to find the revenue to meet McCleary.

The Legislature still must decide how it will find that money for education. There are a number of options lawmakers are mulling, including closing tax breaks, enacting new taxes or making budget cuts.